Note 19 - Regulatory Matters

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 19.  REGULATORY MATTERS

The primary source of funds for our dividends paid to our shareholders is dividends received from our subsidiaries.  Dividends paid by the subsidiary bank are subject to restrictions by banking law and regulations and require approval by the Bank’s regulatory agency if dividends declared in any year exceed the bank’s current year's net income, as defined, plus its retained net profits of the two preceding years.  During 2023, the Bank will have $90.1 million plus net income for the interim periods through the date of declaration, available for dividends for distribution to us.  

Our subsidiary bank may be required to maintain reserve balances with the Federal Reserve Bank.  The required reserve balance was zero at December 31, 2023 and 2022.

Our bank subsidiary, Summit Community Bank, Inc. (“Summit Community”), is subject to various regulatory capital requirements administered by the banking regulatory agencies. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, Summit Community must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.  Our bank subsidiary’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require Summit Community to maintain minimum amounts and ratios of Common Equity Tier 1("CET1"), Total capital and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).  We believe, as of December 31, 2023, that our bank subsidiary met all capital adequacy requirements to which they were subject.

The most recent notifications from the banking regulatory agencies categorized Summit Community as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, Summit Community must maintain minimum CET1, Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below.

In December 2018, the federal bank regulatory agencies approved a final rule modifying their regulatory capital rules to provide an option to phase-in over a period of three years the day-one regulatory capital effects of the implementation of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. We elected to this optional phase-in period upon adoption of the ASU effective January 1, 2020. 

The following tables present Summit's, as well as Summit Community's, actual and required minimum regulatory capital amounts and ratios as of December 31, 2023 and December 31, 2022. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended.

	Actual					Minimum Required Capital - Basel III					Minimum Required To Be Well Capitalized
Dollars in thousands	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2023
CET1 (to risk weighted assets)
Summit	$	369,935		9.1	%	$	285,338		7.0	%		N/A		N/A
Summit Community		475,785		11.7	%		284,873		7.0	%		264,525		6.5	%
Tier I Capital (to risk weighted assets)
Summit		403,855		9.9	%		346,481		8.5	%		N/A		N/A
Summit Community		475,785		11.7	%		345,917		8.5	%		325,569		8.0	%
Total Capital (to risk weighted assets)
Summit		556,590		13.7	%		428,006		10.5	%		N/A		N/A
Summit Community		524,737		12.9	%		427,309		10.5	%		406,961		10.0	%
Tier I Capital (to average assets)
Summit		403,855		8.7	%		186,747		4.0	%		N/A		N/A
Summit Community		475,785		10.2	%		186,057		4.0	%		232,571		5.0	%
As of December 31, 2022
CET1 (to risk weighted assets)
Summit	$	299,993		8.6	%	$	245,141		7.0	%		N/A		N/A
Summit Community		405,430		11.6	%		244,502		7.0	%		227,038		6.5	%
Tier I Capital (to risk weighted assets)
Summit		333,913		9.5	%		297,672		8.5	%		N/A		N/A
Summit Community		405,430		11.6	%		296,896		8.5	%		279,431		8.0	%
Total Capital (to risk weighted assets)
Summit		472,955		13.5	%		367,712		10.5	%		N/A		N/A
Summit Community		441,177		12.6	%		366,754		10.5	%		349,289		10.0	%
Tier I Capital (to average assets)
Summit		333,913		8.5	%		156,852		4.0	%		N/A		N/A
Summit Community		405,430		10.4	%		156,338		4.0	%		195,422		5.0	%